The Implications of Faster Lending: Loan Processing Time and Corporate Cash Holdings

Vesa Pursiainen, Hanwen Sun, Qiong Wang and Guochao Yang
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Vesa Pursiainen: University of St. Gallen; Swiss Finance Institute
Hanwen Sun: University of Bath, School of Management
Qiong Wang: Southeast University
Guochao Yang: School of Accounting, Zhongnan University of Economics and Law; IIDPF, Zhongnan University of Economics and Law

No 25-17, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: A unique natural experiment in China – the city-level staggered introduction of administrative approval centers (AAC) – reduces bank loan processing times by substantially speeding up the process of registering collateral without affecting credit decisions. Following the establishment of an AAC, firms significantly reduce their cash holdings. State-owned enterprises are less affected. Cash flow sensitivity of cash holdings decreases, as does the cash flow sensitivity of investment. The share of short-term debt increases, while inventory holdings and reliance on trade credit decrease. Defaults also decrease. These results suggest that timely access to credit has important implications on firms' financial management.

Keywords: banking; efficiency; precautionary cash holdings; capital management; corporate loans (search for similar items in EconPapers)
JEL-codes: D25 G21 G28 G32 (search for similar items in EconPapers)
Pages: 69 pages
Date: 2025-02
New Economics Papers: this item is included in nep-cfn, nep-cna and nep-inv
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